Tuesday, June 5, 2012

Lakers y Facebook

On Friday, May 18, Facebook submitted its initial public offering at $38 a share and the Los Angeles Lakers won their last playoff game against the Oklahoma City Thunder. Both were based on or inspired by irrational exuberance and neither should have happened. Here's why.

Here's the thing with IPOs. When you have pre-IPO financial stake in a company it's in your interest to increase the asking share price (based on the assumption that more money > less money). In other words, the more you ask for the more you get. Normally, there is some issuing body--Morgan Stanley in the case of Facebook--that bases the offering price on some objective measure. (A reasonable, simple metric would be price to earnings--you would expect the price of a share of Facebook to be similar to the price of a share of a similar tech company with similar earnings.)

But the excitement surrounding Facebook, Justin Timberlake, 'what's cooler than a million dollars' granted those with a stake in the company leverage on their issuing partner, who usually makes the same amount of money regardless of the asking price. As a result, the price of a stock that based on conventional, objective measures should have opened in the teens and taking the once-in-a-lifetime excitement into account maybe the mid-twenties per share, became grossly inflated, which resulted in the character that plays Jesse Eisenberg in real life and his real life friends to prosper quite handsomely.

Now the Lakers. The Lakers benefit from a similar irrational exuberance however theirs is much more sustained (in less than three weeks since its IPO FB shares have dropped almost 35%). The Lakers hype is based in the belief that Kobe Bryant is superior to the rest of the NBA. It's what enables the Lakers to continue to recruit a dominant supporting cast--bear in mind that John Starks would have won back-to-back rings if he played with Shaq in Shaq's prime--while protecting Kobe from objective analysis that definitively shows that he shoots the ball a whole heck of a lot while not making it all that much and when things go South is quick to accuse Pau Gasol or some other not equally alpha-male of lack of aggressiveness.

Kobe is given such leniency because there is a whole generation of basketball fans--and a coast of the United States--that wants desperately to believe that Kobe is Jordan. Unfortunately, these individuals cannot accept that while he shares Jordan's elite scoring and defense, Kobe is an inferior passer and defender, couldn't force turnovers like Jordan, and didn't age nearly as well. (At 33 Kobe shot 43% and had a 22 PER; Jordan, on the other hand, shot almost 49% and had a 28 PER. In fact at 39, Jordan shot 45% and had a 20 PER. This latter year was on a team, of course, that included the dual threats of Jahidi White and Christian Laettner--the early 2000s version of Andrew Bynum and Pau Gasol if the early 2000s were 15 years after the USSR conquered the US in the Cold War and attendance merited the same acclaim as achievement.)

It is this Kobe hysteria that led many analysts to pick the Lakers over the Thunder in a series that the Lakers were lucky to push to five games. In the off-season this popular misconception of Kobe's worth might land the Lakers Dwight Howard or Deron Williams, which will ensure Los Angeles a top five finish in the West but it won't hide that in highly competitive and defensive playoff games Kobe's FG attempt to point ratio is coming increasingly closer to one. In the end the obsession will benefit the elite Western teams, like the Thunder, as the Lakers and Kobe dilute free agent talent that could build elsewhere in the West, like Dallas, by accumulating talent in Los Angeles and mitigating its potential as Kobe fires off 30+ field goals because he and most everyone else want to compare him to Jordan.